Examining the role of economic policy uncertainty and green growth in public pension spending dynamics: evidence from OECD economies

What the paper says

Abstract Many countries around the world have introduced pension reforms to address the challenges posed by the growing elderly population and the need for sustainable public pensions. Besides, economic policy uncertainty and the potential shift of resources toward green growth raise additional concerns for the elderly well-being. Therefore, this study examines the impact of economic policy uncertainty and green growth on public pension spending in 16 OECD (Organization for Economic Co-operation and Development) economies from 1997 to 2023. We employed advanced panel data models that account for cross-sectional dependence and other potential issues associated with longitudinal data sets. The findings reveal that high economic policy uncertainty is associated with a decrease in public pension spending, whereas green growth is associated with an increase in public pension spending. Meanwhile, the employment rate, inflation rate, and social spending are found to play a mediating role in reducing the negative impact of economic policy uncertainty on public pension spending in OECD economies. Building on the findings of the study, we propose a 2-pronged policy framework that outlines strategies for safeguarding pensioners from short-run economic uncertainties while simultaneously proposing long-run interventions for their continuous support.